Manufacturers go lean, mean – Survival increasingly depends on efficiency

If you ask Charlie Copeland why his small printing company was willing to pay its 50 employees overtime and limit production for a week to train them to become more efficient, his answer is simple: fear.

Luladey B. Tadesse
(Wilmington, Del.) News Journal

http://www.azcentral.com/arizonarepublic/business/articles/0105lean05.html

"I get better, faster or I go out of business," said Copeland, president of Associated Graphics Services in Wilmington, Del., who has invested more than $40,000 in the past four years to train his workers to run a lean operation.

While some companies look to reduce costs by moving operations overseas, others hope to make fundamental changes that ultimately will keep jobs in the United States.

One of the most popular models used to achieve this goal is "lean manufacturing."

The concept dates to Henry Ford but became a buzzword in the manufacturing industry more recently when Toyota Corp. adopted techniques to eliminate waste and streamline production. The objective is to evaluate the entire production process, identify inefficiencies and use workers’ input to correct them.

"Anything that you can do to decrease the amount of waste or increase the profitability needs to be done," said Erich Merkle, auto analyst at IRN Inc. in Grand Rapids, Mich., which conducts market research for automotive suppliers.

About 36 percent of U.S. manufacturers identify lean manufacturing as their primary improvement methodology, according to preliminary results of the 2003 IndustryWeek/Manufacturing Performance Institute Census of Manufacturers.

Advocates of the lean model believe the more productive manufacturers become, the more the companies will be able to expand and create jobs. But so far, manufacturing companies mostly have become more efficient as they laid off workers.

The manufacturing sector nationwide has been hardest hit by the economic downturn that began nearly three years ago.

Nationally, 2.2 million factory jobs were eliminated between March 2001 and October 2003. That accounted for a 13.4 percent decline in jobs within that sector.

According to the Economic Trade Policy Institute, the United States’ $359 billion trade deficit between March 1998 and November 2003 resulted in the loss of about 3.5 million manufacturing jobs and opportunities to other countries. The institute estimates that about 10,000 jobs are lost for every $1 billion increase in the trade deficit.

"If you look at the companies that have put in lean principles and put in lean manufacturing, they are the ones that are left standing at the end of the day and not the ones laying off workers," Copeland said.

Automakers such as General Motors, Ford and Chrysler have been implementing lean strategies since the 1980s. Other large manufacturers soon followed suit. Now small manufacturers increasingly look to take advantage of such methods.

Lean manufacturing is unusual in that it is a holistic approach to evaluating the entire production process to find areas that need improvement, experts said.

"You look at every step and say, ‘Is it valuable?’ " said James Womack, president of the Lean Enterprise Institute in Massachusetts and co-author of The Machine That Changed the World, which has popularized the lean model.

Using this strategy, Copeland was able to identify 38 quality checkpoints in the printing process. Since beginning his lean "journey," he has been able to reduce the time it takes his workers to change from one printing job to the next from one hour to 40 minutes. He also has increased productivity by a third.

But nationally the increase in productivity has not translated into more manufacturing jobs.

"The companies are finding they can increase output without having to hire people," said Phil Hopkins, regional economist at Global Insight, an economic-forecasting firm in Eddystone, Pa.

"They were basically able to get rid of people and increase output."